Mirae Asset Healthcare Fund (NFO) – Should you invest?

Pharma and Healthcare is one of my favorite sector in the last decade. However, Pharma/Healthcare has been under performer in the last couple of years. In this uncertainty, Mirae Asset Healthcare Fund (NFO) would open for subscription on 11th June, 2018. This new mutual fund scheme would tap the opportunities in Pharma and Healthcare Sector. There are already few mutual fund schemes in Pharma and Healthcare, hence need to see how this new fund would catch attention of investors. Should you invest in Mirae Asset Healthcare Fund? What are the risk factors an investor need to consider before investing in this Mirae Asset Healthcare New Fund Offer (NFO)?

Scheme expense ratio is estimated up to 2.5% of the total assets on any day.

Who is the Fund Manager for of this Fund NFO?

The Fund Managers are Mr.Vijesh Kasara and Mr.Neelesh Surana.

What is the investment objective and strategy of this Mirae Asset Healthcare Fund?

This mutual fund scheme aims to generate long term capital appreciation by investing in equity and equity related securities of companies that are directly or indirectly in healthcare or allied sectors in India. Its investment strategy is to invest at least 80% in pharma, healthcare and allied sectors. It also has the flexibility to invest across market capitalization and selects investment opportunities within the portfolio. It has an endeavor to maintain 30-40 stocks within this concentrated portfolio.

What is the allocation pattern in this mutual fund scheme?

This fund investment pattern looks as follows:

1) It invests 80% to 100% in equity and equity related instruments of companies that are directly or indirectly from healthcare and allied sectors.

2) It invests 0% to 20% in equity and equity related instruments of companies engaged in other than healthcare and allied sectors.

Since this is sector mutual fund, it would restrict within pharma/healthcare/allied sector stocks for investments.

Can NRI invest in this MF scheme?

Yes, they can invest in this scheme.

How is the Performance of Existing Pharma and Healthcare Mutual Funds?

Currently there are existing pharma and healthcare mutual funds, hence let us review how they are performing.

1) Reliance Pharma Fund: This is one of my favorite fund. This fund gave 13% returns in the last 1 year, 1% annualized returns in the last 3 years and 14% returns in the last 5 years. If you would have invested Rs 1,000 per month through SIP for 5 years, your invested value would have been Rs 60,000 and your investment would have grown to Rs 70,000 now. If you would have invested Rs 1 Lakh 5 years back, your investment would have now grown to Rs 1.9 Lakhs. The majority under performance in the last 1-3 years are due to the entire pharma sector being in a downtrend.

2) SBI Healthcare Opportunities Fund (erstwhile SBI Pharma Fund): This fund gave -5% (negative) returns in the last 1 year, -7% (negative) annualized returns in the last 3 years and 12% returns in the last 5 years. If you would have invested Rs 1,000 per month through SIP for 5 years, your invested value would have been Rs 60,000 and your investment would have grown to Rs 62,000 now. If you would have invested Rs 1 Lakh 5 years back, your investment would have now grown to Rs 1.8 Lakhs. The majority under performance in the last 1-3 years are due to the entire pharma sector being in a downtrend.

3) UTI Healthcare Fund (erstwhile UTI Pharma and Healthcare Fund): This fund gave 1% returns in the last 1 year, -6% (negative) annualized returns in the last 3 years and 10% returns in the last 5 years. If you would have invested Rs 1,000 per month through SIP for 5 years, your invested value would have been Rs 60,000 and your investment would have grown to Rs 61,000 now. If you would have invested Rs 1 Lakh 5 years back, your investment would have now grown to Rs 1.6 Lakhs. Even here, the major under performance in the last 1-3 years are due to the entire pharma sector being in a downtrend.

What are the risks involved in the banking sector fund?

One should consider some of these risk factors before investing.

1) This mutual fund scheme is a sector mutual fund scheme. Any sector fund is high risk as invests only in one particular sector.

2) Pharma and Healthcare sectors are under performers in the last couple of years. If you observe, some of these mutual funds gave negative returns in the last 2-3 years.

3) This fund invests up to 20% in debt instruments. Certain debt instruments carry credit risk and there could be a downfall in such instrument ratings and values.

It has been an evergreen sector over a decade where pharma / healthcare companies have been posting double digit growth in revenues and margins. However, due to stiff competition from US Drug makers, Indian drug exports have declined by 5% YoY last year. We have been seeing this in the last couple of years in terms of performance of pharma stocks. This could cause some pressure to pharma stocks in future too. However, this mutual fund scheme invests in health care and allied segments too, which includes hospitals, medical diagnostics, medical equipment companies, specialty chemicals, insurance, etc., If you wish to take advantage of investment opportunities from pharma and healthcare sector and willing to take high risk, investors can invest in this new mutual fund scheme for medium to long term of 3-5 years.

Nice Article!
Sir, I have a little doubt associated with the article. Can you please tell me how we can take advantages of investment opportunities in healthcare sector in brief. You respond to my query will be highly appreciable sir.

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